As Amazon Mimics Google’s Price Drop, Cloud Computing Grows Up

Who defines when a price is "far higher" than it could be? And who says they aren't operating at a loss?

You're making an assumption that they aren't now operating at a loss. I don't think they are but I wouldn't assume it. It wouldn't be the first time they've operated at a loss in an attempt to corner the market.

It's quite possible that Amazon and/or Google is prepared to operate their cloud (or some parts of their cloud) at a loss, or at least at zero margins. Look at Amazon's financial statements and you'll find they operate almost all their business on zero margin.

The reasons for that differ - Amazon optimises for growth and market domination over profits, while Google doesn't want to see Amazon control the entire cloud market.

Amazon is very calculating when it comes to operating at low margin. What they mean by running a low margin business is that their operations are capable of running at close to zero margin for almost any product they carry. When they can, they charge high margins and get to have all the extra surplus. When competition thickens up, they reduce the prices to undercut all the other guys.

AWS pricing is where this happens the least, by the way, since the prices move so infrequently. In other product categories like DVDs and household items, prices moves up and down almost daily in response to changing market conditions.

True, but amazon will intelligently price cut any competitor. Meaning, perhaps the margins aren't always so tiny, but they're prepared should the market require it.

There's quite a few.. super fast networks, network based elb (i assume cause it scales up smoothly and instantly), persistent volumes that can be attached to multiple machines at the same time (read only).. etc.